A worker at the Jaguar Land Rover plant in Solihull, UK.
Photograph: Leon Neal/Getty Images

The 40,000 British employees of Jaguar Land Rover face the prospect of further job cuts after Britain’s biggest carmaker launched a £2.5bn plan to reduce costs and free up cash.

JLR announced its intentions on Wednesday after slumping £90m into the red in the three months to September, hit by falling sales in China and Europe.

The company will reduce annual investment from £4.5bn to £4bn this year and next, while reducing the stock of finished cars it holds and its working capital by £500m.

It will also cut £1bn in costs. The firm has implemented a freeze on recruitment and all non-essential travel, as it battles against falling demand.

Unions were briefed on the plans before the announcement. However, JLR said no decisions on employment levels have been made.

Des Quinn, national officer at the Unite union, said: “Unite will be pressing JLR for further detail on its plans in addition to commitments on future models to be made here in the UK to ensure the carmaker remains a powerhouse of UK manufacturing and source for decent, well-paid jobs.”

JLR announced 1,000 job losses at its Solihull factory in April after British sales of its Range Rover and Discovery models shrank because of “headwinds” from Brexit and uncertainty over government action on diesel vehicles.

The company, which is owned by the Indian conglomerate Tata, also said in September that about 2,000 staff will move to a three-day week at its Castle Bromwich plant in the West Midlands.

JLR is facing a “perfect storm” from Brexit, new diesel legislation and a weaker Chinese market, according to the automotive expert David Bailey, a professor of industry at the Aston Business School in Birmingham.

“I fear we’ll see another tranche of job cuts in the new year,” he said, with Solihull particularly vulnerable to a fall in Chinese demand.

JLR endured a painful 43.8% year-on-year sales fall in China in the quarter, which it blamed on slowing growth and caution amid the trade war with the US. Chinese sales accounted for just under one in every six vehicles sold by JLR in the period.

The company has also suffered from competition in China, where rival carmakers are undercutting its relationships with dealers. A spokesperson confirmed that “competitor incentive activity” had an effect on sales in China.

JLR has underperformed against its peers in the broader market in the world’s second-largest economy. Chinese car sales fell by 11.6% year-on-year in September, according to the China Association of Automobile Manufacturers.

The car sector in China is among the hardest hit by the impact of tariffs imposed as part of the trade war triggered by the US president, Donald Trump. However, JLR said it expects import duty cuts for European cars introduced in July to benefit it over the medium term.

Global sales for the quarter fell by 13.2% year on year, to 129,887 vehicles, JLR said on Wednesday. The £90m loss compares with a profit of more than £380m in the same quarter last year.

Global revenues fell by 10.9% year on year to £5.6bn, as sales declined across all of its main markets, including an 11.9% drop in Europe.

In Europe, JLR faces “continued uncertainty”, he added, with increased regulatory scrutiny on diesel vehicles, the change to a new emissions-testing regime and the UK’s impending departure from the EU.

Speth has previously been an outspoken critic of the government’s approach to Brexit negotiations. At a conference in September, he told Theresa May that a no-deal Brexit would trigger “tens of thousands” of job losses in the car industry.